GBP/USD
Sure enough the Cable crumbled after dropping below the psychological 1.40 cushion yet is bouncing off our previous bottom-end of 1.3856. The weakness comes after a slew of negative news concerning Britain. To get started, the IMF projected the British economy will not turn around until 2011, highlighting the severity of the situation. The Claimant Count Change (CCC) number leaves us speechless. Not only did Britain revise the last CCC number upwards, but today’s release is disastrous at best. The CCC came in at roughly 138,400 compared to analyst estimates of 84,500. Hence, British unemployment is rising at an accelerated rate, blowing past even the worst-case expectations. Meanwhile, the BOE is proceeding with quantitative easing to fund economic stimulus efforts while maintaining a reasonable interest rate level on government debt. Quantitative easing has proven unsuccessful in the past due to the massive amount of money printing involved. Therefore, all signs still point towards the downside for the GBP/USD. If March lows can’t hold we will surely see a retest of January lows. Meanwhile the Cable has our 1st tier downtrend line to fall back on and March lows would provide a challenge to the downside. Fundamentally, we find resistances of 1.4047, 1.4112, 1.4156, and 1.4199. To the downside, we see supports of 1.4008, 1.3957, 1.3910 and 1.3856. The GBP/USD is currently exchanging at 1.2986.
EUR/USD
The EUR/USD is still battling with March highs while jammed in the 1.30 zone. The Euro is enjoying relative strength against the Dollar and Pound after Germany’s economic sentiment came in better than analyst expectations. The EUR/GBP is breaking out to the upside in reaction to horrible economic data from Britain. However, we feel yesterday’s consumer sentiment data may be a lagging indicator considering Germany showed production fell off a cliff last week. Lower production and manufacturing implies rising unemployment and consequently reduced consumption. Hence, we caution against getting carried away with yesterday’s consumer sentiment release. Meanwhile, the EUR/USD remains above our 3rd tier downtrend line and is building a solid trading base during its consolidation. With a lack of significant economic data coming from the EU over the rest of the week, we expect a tight correlation with U.S. equities over the next couple sessions. Meanwhile, if the EUR/USD can peak over February highs, we could see the currency pair dart towards a retest of 2009 highs. Fundamentally, our 1.3022 resistance becomes support while we maintain our additional supports resting at 1.2991, 1.2934, and 1.2910. To the topside, we maintain our resistances of 1.3058, 1.3086, and 1.3120 with fresh top-end hanging at 1.3147. The EUR/USD is currently exchanging at 1.3039.
USD/JPY
Not much has changed in the USD/JPY with the consolidation process dragging on. The sideways movement of the USD/JPY over the last three weeks signifies the relevance of the psychological 100 level. Investors are still reluctant to test it, indicating they haven’t bought into a bottom in U.S. equities yet. While the Japanese economy is incredibly weak, America’s certainly isn’t putting on a stellar performance. Therefore, if the U.S. economy continues to shell out more negative economic data the USD/JPY should continue its consolidation or possibly make a large movement south. The driving forces shooting the currency pair above 100 will surprisingly positive economic data from the U.S. or devastating news out of Japan. However, we caution investors not to grow complacent during consolidation, for when the directional decision is made the movement will be quick and sharp. Fundamentally, we maintain our resistance of 99.05 with additional resistances hanging at 99.96, 100.69, and 101.53. To the downside, we hold our 98.25 support with additional supports sitting at 97.66, 97.22, and 96.59. The USD/JPY is currently exchanging at 98.57.
Crude Oil
Crude futures continued their impressive climb after jumping above our 2nd tier trend line, but backed away from the highly psychological $50/bbl level as anticipated. January 26 highs are intact for the time being and are the only obstacle, a weak one at that, preventing crude from challenging 2009 highs. The S&P futures are on a roll, always a strong catalyst to send crude prices higher due to improved expectations concerning production and consequently consumption of energy. However, whether crude rises through $50/bbl and runs towards $55/bbl will depend on the weekly crude oil inventory report coming today. Despite the flash of encouraging data coming from the U.S., Europe and Asia continue to weaken at an incredible pace. Declining global production coupled with OPEC keeping production rates neutral on March 15 make jumping through $50/bbl all the more challenging. The medium-term downtrend remains intact and it will take breaking out of 2009 highs to make believers out of us. Nevertheless, crude futures are well above all of our near-term downtrend and uptrend lines, provided a clear indication that there could be more near-term gains to be realized. Fundamentally, we find supports of $48.59/bbl, $48.23/bbl, $47.85/bbl, and $47.06/bbl. To the topside, we see resistances of $49.09/bbl, $49.57/bbl, $49.91/bbl, and $50.28/bbl. Crude futures are currently trading at $48.78bbl.
Gold
Gold continues to drift downward, sliding below our 2nd tier uptrend line. However, the precious metal has yet to make a drastic move to the downside considering the furious rally taking place on Wall Street. Therefore, investors continue to display reluctance in dropping gold below our 3rd tier downtrend line and the highly psychological $900/oz level. Therefore, the uptrend lives to see another day. On the other hand, if the precious metal should sink below the previously mentioned critical fundamental supports, we would expect a heightened near-term selloff. Fundamentally, our $922.92/oz support turns resistance while we hold our resistances of $928.57/oz, $932.04/oz, and $932.42/oz. To the downside, we maintain our supports of $919.01/oz, $913.80/oz., $909.89/oz. with fresh bottom-end support of $905.52/oz. The $900/oz level serves as a psychological cushion to the downside. Gold is currently trading at $919.70/oz.
S&P
The S&P futures leapt to finish with more extraordinary gains after Housing Starts and Building Permits came in better than expected. Since the economic crisis was triggered by the downfall of the U.S. housing market, any uptick in residential construction serves as a strong catalyst to the upside. However, the surprisingly optimistic number was driven by an increase in the construction of apartment buildings. With a staggering amount of foreclosures, there should be no shock that more families are opting to live in multi-bedroom apartments to weather the storm in residential and credit markets. The production, manufacturing and employment data points are resoundingly negative around the globe. To highlight this statement, Britain announced a jaw-dropping 138,400 claimant count number compared to analyst expectations of a 84,500 rise in unemployment claims. Hence, while America may be stabilizing a bit in some areas, the economic downturns in Europe and Asia are just picking up steam. Since the global economy is so intertwined, we could witness what we would like to call refraction. The massive economic tsunami created by the U.S. is striking Europe and Asia. While the policies enacted by the U.S. government may be helping stabilize its domestic economy, we could see the wave refract and head back towards America, delivering yet another blow to an already beleaguered economy. Therefore, even though U.S. equities are exhibiting a furious rally right now, we can’t keep our eyes off of the troubling data/news coming from Europe and Asia. As mentioned in our previous postings, we take optimistic claims from bank CEOs with a grain of salt these days. What matters in the end are quarterly earnings, not what happens the first two months of the year. Meanwhile, the S&P futures are being blocked by our 3rd tier downtrend line with the highly psychological 800 level within reach. As a result, we would not be surprised to witness some near-term consolidation. The U.S. will release more critical economic data today, including CPI and the Current Account. Even though the PPI was reported in-line with expectations yesterday, a negative CPI could deflate the sails of the rally in equities. The correlations are still waiting on the S&P to make up its mind on whether to commit to a serious uptrend. Fundamentally, we find resistance of 761.5 with additional resistances hanging at 765.5, 772.25, and 776.75. To the downside, we see support of 755.5 with additional supports sitting at751.75, 748, and 744. The S&P futures are currently trading at 757.25.
30 Year
The 30 Year T-Bond futures headed lower yesterday, exercising their negative correlation with U.S. equities. However, the 30 Year futures have caught themselves just above March lows in an effort to ‘hold the fort’ so to speak. Despite the resilience of the 30 Year to stay within a reasonable range, the declining purchases of U.S. treasuries by China will weigh down on the futures for some time. China is running a lower trade surplus due to plummeting exports, resulting in declining foreign exchange reserves. Therefore, China is slowing its purchases of U.S. debt and diversifying its reserves in an effort to decrease their reliance on any one investment. This development creates a downward hand on the price of the 30 Year and raises the interest rate to attract more investors. The 30 Year futures are holding onto their lows right now in anticipation of a decision from the Fed on whether to proceed with quantitative easing. Quantitative easing could provide a temporary boost to the price of the 30 Year futures. However, the downtrend still holds strong and will continue to do so until the futures can climb through our 2nd tier downtrend line. Fundamentally, we see resistance of 125.34 with additional resistances hanging at 125.75, 126.08, and 126.72. To the downside, we find supports of 124.98 and 124.58. The 30 Year Treasury Bond futures are currently trading at 125 05.0.
Sure enough the Cable crumbled after dropping below the psychological 1.40 cushion yet is bouncing off our previous bottom-end of 1.3856. The weakness comes after a slew of negative news concerning Britain. To get started, the IMF projected the British economy will not turn around until 2011, highlighting the severity of the situation. The Claimant Count Change (CCC) number leaves us speechless. Not only did Britain revise the last CCC number upwards, but today’s release is disastrous at best. The CCC came in at roughly 138,400 compared to analyst estimates of 84,500. Hence, British unemployment is rising at an accelerated rate, blowing past even the worst-case expectations. Meanwhile, the BOE is proceeding with quantitative easing to fund economic stimulus efforts while maintaining a reasonable interest rate level on government debt. Quantitative easing has proven unsuccessful in the past due to the massive amount of money printing involved. Therefore, all signs still point towards the downside for the GBP/USD. If March lows can’t hold we will surely see a retest of January lows. Meanwhile the Cable has our 1st tier downtrend line to fall back on and March lows would provide a challenge to the downside. Fundamentally, we find resistances of 1.4047, 1.4112, 1.4156, and 1.4199. To the downside, we see supports of 1.4008, 1.3957, 1.3910 and 1.3856. The GBP/USD is currently exchanging at 1.2986.
EUR/USD
The EUR/USD is still battling with March highs while jammed in the 1.30 zone. The Euro is enjoying relative strength against the Dollar and Pound after Germany’s economic sentiment came in better than analyst expectations. The EUR/GBP is breaking out to the upside in reaction to horrible economic data from Britain. However, we feel yesterday’s consumer sentiment data may be a lagging indicator considering Germany showed production fell off a cliff last week. Lower production and manufacturing implies rising unemployment and consequently reduced consumption. Hence, we caution against getting carried away with yesterday’s consumer sentiment release. Meanwhile, the EUR/USD remains above our 3rd tier downtrend line and is building a solid trading base during its consolidation. With a lack of significant economic data coming from the EU over the rest of the week, we expect a tight correlation with U.S. equities over the next couple sessions. Meanwhile, if the EUR/USD can peak over February highs, we could see the currency pair dart towards a retest of 2009 highs. Fundamentally, our 1.3022 resistance becomes support while we maintain our additional supports resting at 1.2991, 1.2934, and 1.2910. To the topside, we maintain our resistances of 1.3058, 1.3086, and 1.3120 with fresh top-end hanging at 1.3147. The EUR/USD is currently exchanging at 1.3039.
USD/JPY
Not much has changed in the USD/JPY with the consolidation process dragging on. The sideways movement of the USD/JPY over the last three weeks signifies the relevance of the psychological 100 level. Investors are still reluctant to test it, indicating they haven’t bought into a bottom in U.S. equities yet. While the Japanese economy is incredibly weak, America’s certainly isn’t putting on a stellar performance. Therefore, if the U.S. economy continues to shell out more negative economic data the USD/JPY should continue its consolidation or possibly make a large movement south. The driving forces shooting the currency pair above 100 will surprisingly positive economic data from the U.S. or devastating news out of Japan. However, we caution investors not to grow complacent during consolidation, for when the directional decision is made the movement will be quick and sharp. Fundamentally, we maintain our resistance of 99.05 with additional resistances hanging at 99.96, 100.69, and 101.53. To the downside, we hold our 98.25 support with additional supports sitting at 97.66, 97.22, and 96.59. The USD/JPY is currently exchanging at 98.57.
Crude Oil
Crude futures continued their impressive climb after jumping above our 2nd tier trend line, but backed away from the highly psychological $50/bbl level as anticipated. January 26 highs are intact for the time being and are the only obstacle, a weak one at that, preventing crude from challenging 2009 highs. The S&P futures are on a roll, always a strong catalyst to send crude prices higher due to improved expectations concerning production and consequently consumption of energy. However, whether crude rises through $50/bbl and runs towards $55/bbl will depend on the weekly crude oil inventory report coming today. Despite the flash of encouraging data coming from the U.S., Europe and Asia continue to weaken at an incredible pace. Declining global production coupled with OPEC keeping production rates neutral on March 15 make jumping through $50/bbl all the more challenging. The medium-term downtrend remains intact and it will take breaking out of 2009 highs to make believers out of us. Nevertheless, crude futures are well above all of our near-term downtrend and uptrend lines, provided a clear indication that there could be more near-term gains to be realized. Fundamentally, we find supports of $48.59/bbl, $48.23/bbl, $47.85/bbl, and $47.06/bbl. To the topside, we see resistances of $49.09/bbl, $49.57/bbl, $49.91/bbl, and $50.28/bbl. Crude futures are currently trading at $48.78bbl.
Gold
Gold continues to drift downward, sliding below our 2nd tier uptrend line. However, the precious metal has yet to make a drastic move to the downside considering the furious rally taking place on Wall Street. Therefore, investors continue to display reluctance in dropping gold below our 3rd tier downtrend line and the highly psychological $900/oz level. Therefore, the uptrend lives to see another day. On the other hand, if the precious metal should sink below the previously mentioned critical fundamental supports, we would expect a heightened near-term selloff. Fundamentally, our $922.92/oz support turns resistance while we hold our resistances of $928.57/oz, $932.04/oz, and $932.42/oz. To the downside, we maintain our supports of $919.01/oz, $913.80/oz., $909.89/oz. with fresh bottom-end support of $905.52/oz. The $900/oz level serves as a psychological cushion to the downside. Gold is currently trading at $919.70/oz.
S&P
The S&P futures leapt to finish with more extraordinary gains after Housing Starts and Building Permits came in better than expected. Since the economic crisis was triggered by the downfall of the U.S. housing market, any uptick in residential construction serves as a strong catalyst to the upside. However, the surprisingly optimistic number was driven by an increase in the construction of apartment buildings. With a staggering amount of foreclosures, there should be no shock that more families are opting to live in multi-bedroom apartments to weather the storm in residential and credit markets. The production, manufacturing and employment data points are resoundingly negative around the globe. To highlight this statement, Britain announced a jaw-dropping 138,400 claimant count number compared to analyst expectations of a 84,500 rise in unemployment claims. Hence, while America may be stabilizing a bit in some areas, the economic downturns in Europe and Asia are just picking up steam. Since the global economy is so intertwined, we could witness what we would like to call refraction. The massive economic tsunami created by the U.S. is striking Europe and Asia. While the policies enacted by the U.S. government may be helping stabilize its domestic economy, we could see the wave refract and head back towards America, delivering yet another blow to an already beleaguered economy. Therefore, even though U.S. equities are exhibiting a furious rally right now, we can’t keep our eyes off of the troubling data/news coming from Europe and Asia. As mentioned in our previous postings, we take optimistic claims from bank CEOs with a grain of salt these days. What matters in the end are quarterly earnings, not what happens the first two months of the year. Meanwhile, the S&P futures are being blocked by our 3rd tier downtrend line with the highly psychological 800 level within reach. As a result, we would not be surprised to witness some near-term consolidation. The U.S. will release more critical economic data today, including CPI and the Current Account. Even though the PPI was reported in-line with expectations yesterday, a negative CPI could deflate the sails of the rally in equities. The correlations are still waiting on the S&P to make up its mind on whether to commit to a serious uptrend. Fundamentally, we find resistance of 761.5 with additional resistances hanging at 765.5, 772.25, and 776.75. To the downside, we see support of 755.5 with additional supports sitting at751.75, 748, and 744. The S&P futures are currently trading at 757.25.
30 Year
The 30 Year T-Bond futures headed lower yesterday, exercising their negative correlation with U.S. equities. However, the 30 Year futures have caught themselves just above March lows in an effort to ‘hold the fort’ so to speak. Despite the resilience of the 30 Year to stay within a reasonable range, the declining purchases of U.S. treasuries by China will weigh down on the futures for some time. China is running a lower trade surplus due to plummeting exports, resulting in declining foreign exchange reserves. Therefore, China is slowing its purchases of U.S. debt and diversifying its reserves in an effort to decrease their reliance on any one investment. This development creates a downward hand on the price of the 30 Year and raises the interest rate to attract more investors. The 30 Year futures are holding onto their lows right now in anticipation of a decision from the Fed on whether to proceed with quantitative easing. Quantitative easing could provide a temporary boost to the price of the 30 Year futures. However, the downtrend still holds strong and will continue to do so until the futures can climb through our 2nd tier downtrend line. Fundamentally, we see resistance of 125.34 with additional resistances hanging at 125.75, 126.08, and 126.72. To the downside, we find supports of 124.98 and 124.58. The 30 Year Treasury Bond futures are currently trading at 125 05.0.
